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11 September 2014

FAR TOO MANY people are losing out on a better standard of living in retirement because they make one – or more – basic errors regarding their pension, according to specialist adviser Tideway.

 

The leading retirement and pensions’ planning specialist company today reveals the top mistakes made, and offers advice on how to avoid them.

 

Lauren Peters, Tideway pensions’ adviser, said that the first and biggest error, is failing to join a pension scheme, “particularly if your employer is offering access to one,” says Peters.

 

“While it can be difficult to sacrifice precious income to a pension when money is tight, cutting back on any non-essential spending where possible will not be regretted later down the line.” Other key errors include:

 

• You’re never too young to start a pension; there is no lower age limit for opening a pension: too many people in their 20s and 30s believe retirement is too far away to worry about.

 

• Underestimating how much to save. Achieving a personal pension income of £20,000 a year requires a fund worth around £400,000 before taking tax free cash.

 

• Relying on a partner. Saving into one pension, when you could get two lots of tax relief and then two lots of income is a common mistake.

 

• Don’t forget to claim higher rates of tax-relief.  Most plans provide 20% tax relief on contributions and the rest has to be reclaimed via the tax man.

 

• Most people do not shop around for an annuity. Comparing the market is especially important if you are suffering from an adverse medical condition.

 

• Single-life annuities have implications for a partner. Too many people purchase these because the income available to them is higher than buying a joint annuity.

 

• Equities are volatile. Treat with caution, especially if you are reliant on an invested pension fund (typically finite capital) to provide regular income for a long time.

 

• Failing to nominate a beneficiary. This is particularly relevant for those who have no spouse or civil partner.

 

• Tideway suggests investing in an ISA. It is a prudent move as even though they offer no tax-relief on contributions, they do provide a tax-free income on withdrawals.

 

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